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Providers says half of advisers set for restricted move

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Around 50 per cent of advisers will move to a restricted model over the first three years of the RDR, according to Zurich and Partnership.

Speaking during a panel debate at the Tenet annual conference held in Windsor last week, Zurich chief growth officer David Etherington and Partnership managing director of retirement Andrew Megson agreed that around half of the current adviser community will move to a restricted offering.

Megson said around 15 per cent will have a restricted model when the RDR comes into force but that figure will rise significantly over the three years to the end of 2015.

He said: “I suspect something in the region of 15 per cent will be restricted at the start of 2013 and over the following three years something in the order of 50 per cent will go down the restricted route.”

Etherington agreed, adding: “There is a lot to be said for independence but advisers have got to make commercial decisions and it will be difficult for firms to demonstrate they are independent. I can see 50 per cent going restricted as well.”

In October, Tenet said that 80 per cent of current IFAs would have to change their business model to remain independent after the RDR, as the vast majority of advisers do not currently comply with the FSA’s whole of market requirements for independent advisers.

Consilium Financial Planning managing director Kevin Morgan says: “IFAs are a very resilient bunch and you have to wonder if product providers bandy these kind of figures around because it is in their interests. I would predict that a much higher number of IFAs will remain independent in the next few years, something around 75 to 80 per cent.”

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Readers' comments (10)

  • Kevin Morgan - May I suggest that you revisit the proposed post RDR model for IFAs' as you will find that it is in fact you who is likely to be incorrect and not the product provider!

    If IFAs' compulsorily have to offer advice on products such as ETF's and investments within other higher-risk areas, then this will come at a cost (PII, FSA fees) which will be untenable for firms who have not, and probably will never, use such products. Therefore, restricted advice is a better fit and probably the route most small to medium-sized firms will go along (and God help larger firms who let some of their advisers loose with such armoury!).

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  • I think the assumption is correct but the real problem is the understanding of what exactly constitutes the true definition of Restricted Advice.

    It would appear from our survey that very many IFAs do not fully appreciate it and their clients certainly do not.

    Currently the survey suggests that 22% will be restricted with 12% undecided. This was from a sample of 740 respondents.

    You can see the results via this link-

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  • Steve, it's not so much that an Independent 'will have' to offer advice on ALL products, but that you would have to demonstrate and document, by client or client grouping, why you considered specific products to be unsuitable.

    The bottom line is the same however, a majority of smaller (current) IFAs will not consider it worthwhile jumping through all the extra hoops, let alone the PI implications. There is also the question of regulated activities such as Pension Transfers, Equity Release etc. If you can't, or don't wish to offer these, or some other product, you can't style yourself as 'Independent'

    There is also the question of multiple RI firms, where some RIs might specialise, say in mortgages or pension transfers, but not deal in other areas. As I understand it, such a firm would not be able to style themselves as 'Independent'.

    It seems to me that the 50% restricted number put forward by Andrew may be low, and I wouldn't be at all surprised if, say by December 2013, 75% of firms will style themselves as 'Restricted, whole of market'. A horrible and clumsy title, but one which may be forced upon us by the muddled thinking on an inadequate regulator.

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  • Our survey, which was pretty wide ranging showed a huge disparity between firms which wanted to retain Independence, those that expected to be able to be Independent and those which would be able to be 'Independent' based on responses to questions around use/understanding ofRIPs etc. Around 50% adopting one of the many, many models of restricted would seem to be about right - but the vast majority of these 'restricted' firms would be operating on what would today be called a 'whole of market' basis. Relatively few firms are currently considering the 'multi-tie' model of 'restricted'

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  • @ Gerry Cooper:

    Please forgive me, but I believe you are wrong on a number of points above. The situation is not nearly so dire for IFAs as you state.

    I recommend you contact Gill Cardy at IFACentre.

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  • @Tim Page

    Hi Tim, I'd be interested to know which points you believe are wrong.

    I'd also like to say that I don't at all think it's at a 'dire situation'. I have no problem becoming 'restricted, whole of market' which, if I'm honest, is what effectively I already am, given that, as a matter of routine, I do not offer advice in certain areas and products, which I suggest is where a great many smaller firms are placed, and always have been.

    The only (minor) problem is the lack of a clear and unambiguous title for what I will continue to offer, the solution to which is that I will not have one, other than 'Financial Adviser'

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  • If you haven't read the report of the Earnst & Young most recent survey on Independence, it is clear that the only people who will be able to afford IFA services will be the wealthy and well off.
    Being restricted does not give you immunity from "advice" failures, only that you do not have to consider the surfeit of inadequate and unsuitable products to the clients in the areas you are giving advice on.

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  • Of course all the banks and providers will be restricted and offering investments at zero initial charge vs 3% with an IFA!!!!!

    I can see a lot of IFAs going Restricted and then 'ending up' doing multi-ties to survive the competition.

    Restricted is a mess and by no means an easy option. I've been in this industry in various roles for more than 20 years and independence is, in my opinion worth fighting for, from the clients persepctive and your own as a business owner.

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  • To correct some of the assertions ...
    Firstly, if you are going to hold yourself out as independent, it can of course only be within your permissions. So if you are not authorised for pension transfers, or equity release then not advising in these areas will not affect your independent status. Similarly, neither does your status with regard to non-retail investment products such as mortgages or non-investment protection.
    Secondly, the FSA has made it perfectly clear that the use of panels and third party research is acceptable to manage the research piece. They have also made clear that suitability for the client is the ultimate acid test - you are not forced to recommend high risk products, certainly not if they are unsuitable for your clients. They have even specifically said that you might for example choose to avoid certain product types because of their regulatory status or lack of compensation scheme - your reasons for discounting a particular product type must be fair and reasonable, though if a client does emerge for whom that option is patently the most suitable answer then you must be free to make that recommendation. I never met a client who wanted or needed a UCIS - but that doesn't need to make me a restricted adviser.
    Hope that clarification helps.

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  • @Rob : as absolutely everyone will be on what amounts to zero initial charge - and everyone, restricted or independent will have to agree the adviser charge before giving advice - the FSA is going to monitor the vertically integrated firms to make sure that they don't just "do everything for free" but sell high charged products which effectively leave them in the same net position.
    All IFAs also have an interest in monitoring this through their own experience and that of their clients - IFA Centre will be delighted to blow the whistle where evidence is found!!

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